Onsemi (ON) spent three months trying to buy Synaptics with a currency that kept losing value: its own stock. That changed Thursday, October 1, when an unnamed rival’s interest pushed the chipmaker into an all-cash deal.
Rival bids usually cost a buyer’s shareholders money, but this one may have saved them some.
Onsemi will now pay $123 per Synaptics share, about $5.7 billion in total, according to a press release. The June version carried a $7 billion price tag, paid entirely in onsemi shares.
The favor comes down to the share count. The old deal would have handed Synaptics shareholders about 59 million new onsemi shares, according to a Bank of America note shared with TheStreet. Cash wipes out that issuance, and BofA now expects the deal to lift earnings rather than dilute them.
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The rival bid gave onsemi a reason to stop paying in stock
Onsemi traded at $118.74 when the original June 25 deal with Synaptics was announced, according to Wall Street Journal figures cited by Quartz, but it was near $80 by Thursday. The exchange ratio was fixed at 1.35 onsemi shares per Synaptics share. So onsemi holders were set to surrender about 12% to 13% of the company at a far lower price, BofA estimated.
Then came “Party A.” That unnamed strategic buyer sent Synaptics an unsolicited, non-binding proposal on Sept. 2, according to an SEC filing. After talks, Synaptics’ board deemed the rival’s improved offer superior, leaving onsemi with a choice: sweeten its terms or lose the target.
In my view, that pressure was the gift. Reopening a signed deal unprompted would have signaled doubt. A credible rival turned renegotiation into a defensive move, and onsemi used it to swap its battered stock for cash.
Cash flips the earnings math for onsemi shareholders
The payoff shows up in earnings per share, which drives chip stock valuations. BofA analyst Vivek Arya now estimates the deal would be about 11% accretive in 2027 and 15% in 2028 versus standalone forecasts. Under the old structure, the bank projected roughly 4% dilution in 2027.
Onsemi’s own outlook moved the same way. The company originally expected the deal to lift adjusted earnings within 18 months of closing, Investing.com reported in June. It now expects an immediate boost, with onsemi CEO Hassane El-Khoury calling the revised agreement “a more financially attractive transaction for our shareholders.”
The trade-off is debt. Onsemi secured a term loan of up to $2.45 billion from Morgan Stanley, Quartz reported, and BofA models a roughly $150 million annual hit to financial income. That is a manageable price for avoiding 59 million new shares.
At Thursday’s close, the old exchange ratio valued each Synaptics share at about $108, so $123 in cash is actually richer. Onsemi is not buying cheaper in market terms.
Instead, it pays to buy back its own shares, a move that only works if those shares are undervalued. I think they are. BofA agrees, rating the stock a Buy with a $120 target based on 20 times 2028 earnings estimates.
Onsemi stock still sits far below its June record
Onsemi makes power and sensing chips for cars, factory equipment and AI data centers. Its shares closed Friday at $84.89, up 6%, according to StockAnalysis.
The 52-week range runs from $44.56 to $134.92, with the high marking an all-time record set on June 3, per StockAnalysis. That leaves the stock about 37% below its peak. Shares had already slipped before the deal, then fell nearly 10% after hours on announcement day, Reuters reported.
Wall Street remains split. The 30 analysts tracked by StockAnalysis give onsemi a consensus Buy rating and an average target of $103.69. Yet 16 rated it Hold in September versus 14 Buy or Strong Buy ratings, and price targets range from $75 to $150.
On Friday, Wells Fargo raised its target to $100 from $85, while Stifel stayed at Hold with a $75 target. The Hold camp has a fair point. The deal fixes dilution, not onsemi’s heavy exposure to slow auto and industrial markets, a risk BofA itself flags.
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Stock-funded chip deals carry a hidden weakness
A fixed exchange ratio ties the target’s price to the buyer’s stock. When that stock falls, the target’s holders receive less, and the door opens for interlopers.
Onsemi knows what a lost target costs. It dropped a $6.9 billion pursuit of Allegro MicroSystems in 2025, Bloomberg Law noted. Losing Synaptics would have marked a second failed major acquisition in about 18 months.
Synaptics shareholders must still vote, and BofA notes other regulatory reviews remain open ahead of a mid-2027 close. Onsemi’s next earnings report, expected around Nov. 2, according to StockAnalysis, is its first chance to explain the new debt.
Party A may never own Synaptics. Yet it reminded every chip buyer that a deal paid in stock is only as strong as the stock itself.
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